Tone still heavy and action dull, but prices hold, deals improve.

Prices and new deals were mixed again yesterday and sluggish trading prevalled, despite a Treasury rally.

Traders reported slow going for the third straight session as they work off a deluge of supply that has hit the market in recent weeks.

High-grade yields were expected to rise about five basis points, traders said at the open, but a government rally saved prices from any big drops.

Municipals were quoted mixed near the end of trading, unable to take advantage of a jump in government prices.

"It's still very sluggish but it seems to be holding at these levels for now," one trader said. "If the Treasury market hangs in there we'll be able to move some of these bonds, but we've still got a lot of way to go."

In the debt futures market, the September municipal contract settled down 1/32 tO 100. 19. The MOB spread spread widened to negative 440 from negative 430 Tuesday.

Treasuries actually opened lower, thanks to supply pressure of their own and a stronger-than-expected durable goods report. New orders for durable goods in June grew 3.8% to $131.6 billion, which was the largest gain this year.

Governments later retraced their losses, and the 30-year was quoted up almost 1/2 point near the end of trading. Treasury players were encouraged by news that President Clinton is considering an executive order to control entitlement spending growth.

But heavy dealer municipal bond inventory, reflected by The Blue List, which rose $41 million, to $2.19 billion yesterday, and a dearth of buyers held tax-exempts at bay.

New Issues

New bond offerings seemed to fare better yesterday than in previous sessions, pricing close to current market levels, market players said.

In competitive action, Lehman Brothers won $254 million of Fairfax County, Va., unlimited tax public improvement refunding bonds with a true interest cost of 5.14587%.

Lehman reported that all bonds sold and the account closed by the end of the day.

Serial bonds were reoffered to in vestors at yields ranging from 2.65% in 1994 to 4.55% in 2000. Bonds from 2001 through 2008 were not formally reoffered to investors.

The issue is rated triple-A by Moody's Investors Service and Standard & Poor's Corp.

At the repricing, yields were lowered by three basis points in 2020 and in 2004, by four basis points in 2003, and by five in 2009 and 2013.

The final offering included serial bonds priced to yield from 5. 1 0% in 1998 to 5.875% in 2004. A 2009 term was priced as 6s to yield 6.15%, a 2013 term was priced as 6.10s to yield 6.25%, and a 2020 term, containing $66 million, was priced as 6.20s to yield 6.32%.

The bonds are rated triple-B-minus by Standard & Poor's and Fitch. A Moody's rating was not applied for, according to the managers.

Serial bonds were priced to yield from 3.10% in 1994 to 5.80% in 2005. A 2008 term was priced as to yield 6.05%; a 2010 term was not formally reoffered to investors; a 2013 term was priced as 6s to yield 6.15%; and a 2023 term, containing $51 million of the loan, was priced as 6s to yield 6.22%.

In late action, New York City 5.80s of 2013 were quoted at 97 1/8-5/8 to yield; PICA MBIA 55/8s of 2023 were quoted at 5.85% bid, 5.83% offered; New York LGAC 5 1/2s of 2018 were quoted at 5.86% bid, 5.84% offered.

Puerto Rico 5 1/2s of 2019 were quoted at 5.71% bid, less 1 1/8 and Salt River 51/4s of 2019 were quoted at 5.79% bid, 5.76% offered.

In short-term note trading, yields were unchanged to as much as five basis points higher on the day, traders said.

In late action, California Rans were quoted at 3.01 % bid, 2.99% offered; and New York State tax and revenue anticipation notes were quoted at 2.65% bid, 2.60% offered.